Usda's Harvest Of Headaches: Bushels And Bushels Of Subsidies

August 28, 1986|By James Kilpatrick, Universal Press Syndicate

WASHINGTON — It's not exactly a trivial question, but try it for size: What area of federal spending has increased most rapidly over the past five years? Defense? Wrong. Social programs? Wrong. For the answer, consider the multiple headaches of Richard Lyng.

Six months have passed since the 66-year-old Californian took over from John Block as secretary of agriculture. He gave up a lucrative private practice as a marketing consultant to return to the department he served as assistant secretary and later as deputy secretary. He's happy to be back, but down at 14th and Independence Ave. N.W. it's no bed of roses.

Some of the programs Lyng administers rock along without much trouble. Food stamps will cost the taxpayers upward of $12 billion this year, but problems of ineligibility that once plagued the program have been pretty well resolved. Long-established farm services go on as usual. It's the price support system decreed by Congress last year that has Lyng shaking his head.

During the five fiscal years from 1981 through 1985, defense spending increased by 55 percent. In this same period outlays for price supports increased by 340 percent. In the fiscal year that ends Sept. 30, farmers will receive ''deficiency payments'' of nearly $26 billion. This is an open-end entitlement program. Except for Social Security, it's the largest entitlement program of them all.

This is how the system works. The law establishes a ''target price'' on corn of $3.03 a bushel. The law also provides for a ''loan level'' of $1.86 a bushel. When the market hits the loan level, which it does, the federal Treasury pays the corn grower the difference of $1.17. This year the deficiency will be paid on 8.3 billion bushels of corn. You can multiply those figures on your handy pocket calculator. The wheat program works the same way. Lyng acknowledges that a great chunk of the subsidy goes to a relatively few superfarmers. Under the law, no grower is supposed to receive more than $50,000 a year, but the big producers easily have avoided that restriction. Anyhow, says Lyng, given the bumper crops of 1985 and 1986, many middle-sized growers surpass the ceiling. Until export markets recover, there's no alternative to the price support system. It provides more than half of the net cash income farmers will receive this year.

Then there's the dairy program. Lyng puts the matter simply: ''The country has 11 million cows, and 10 million is all we need.'' In an effort to ease the situation, Congress came up with a novel plan: The government would pay dairy farmers to go out of business and to stay out of business for at least five years. Roughly 14,000 farmers responded. They went out of business and the government paid them $1.8 billion for the favor.

One consequence was that the cattle market was flooded with the abandoned herds. To keep beef prices from falling, the government agreed to buy up to 400 million pounds of beef, half of it to be used for subsidized exports. Lyng paid $1 a pound for 90,000 tons of beef that were sold to Brazil for 30 cents a pound. The government lost $1,400 on every ton. Try that one on your pocket calculator too.

Meanwhile, back at the 200,000 surviving dairy farms, efficiency levels are improving, feed costs are dropping, and milk production is expanding. The government now owns 627 million pounds of surplus cheese, 242 million pounds of butter and 828 million pounds of dried milk. Lyng gives away a million pounds of cheese a day, but the giveaways displace a big part of the private market and they're not much help.

The fundamental problem here at home, Lyng says, is rooted in elementary economics: too much supply, too little demand. The big problem abroad is what he bluntly terms the ''monkey business'' of nations that subsidize farm exports. ''They're killing us.'' Lyng is cautiously optimistic about the future. This is a time of transition for price supports. Over the next five years costs should go down. The wave of Midwestern foreclosures eventually will subside. Meanwhile, as Lyng ruefully acknowledges, thousands of farmers in the Midwest and in the drought-stricken South continue to find things tough.

What's good on the farm front? Lyng brightens. Hogs are good, vegetables are good, and you know what? The promotion of wine coolers has opened a nice new market for grapes. In the midst of many problems, he'll drink to that.